Downtown Living: Today's Must-Read Analysis from the Trib

"We're starting with the luxury units for people who can afford to live Downtown and make it a place to live," said Lucas Piatt, vice president of Millcraft Industries, which is spending $65 million to convert the former Lazarus-Macy's into Piatt Place. "Then we'll open it up to more people."

That second phase of the revitalization -- making it affordable to live Downtown -- may cost taxpayers who only visit or work there.

"The way to do that is to subsidize," said Patty Burk, vice president of housing and economic development for the Pittsburgh Downtown Partnership. Taxpayers will have to cover "20 to 30 percent of the costs for working professionals and college grads," she said.

But wait. What does she mean by "will have to cover"? Isn't it true that taxpayers are already covering a substantial portion of the cost of these luxury buildings, through tax breaks, through direct subsidies, and by purchasing the properties needed and selling them to developers at a loss? But why? Doesn't the purported demand for such luxury properties call such public support into question? Take a look for yourself:

The high-rise luxury condo building at 151 First Side, which Falbo's company is helping to develop, is almost two-thirds sold six months before the first unit is finished. Prices for the 81 units started at $250,000, and the bulk of those still on the market range from $300,000 to $700,000.

"This is upscale, riverfront living, and obviously the market is supporting it," he said.

Obviously? Well, great then. If the market is supporting it, why are PNC and the Piatts getting subsidies to build more luxury condos? Maybe their projects differ from 151 First Side in certain ways, but are they really all that different? Same city. Same neighborhood. Same target demographic. Etc.

Last, a recurring conversation in this blog surrounds where these new upscale people will come from. People seem to think I am nuts when I say that this new housing will result in transfers from existing neighborhoods, when I wonder about the extent of that transfer, and I ask why no one has seemed to do any sort of analysis in that regard. (For the record, I think that the new neighborhood will result in substantial intra-city transfers, effectively using taxpayer money to entice rich people to move from one neighborhood to another.) "Pshaw!" cry my detractors, who insist that my analysis requires that the new housing serve as a perfect substitute for existing housing.

I say no. I say that it need not be a PERFECT substitute. That while some of the new residents will of course come from outside the city, there will have to be at least SOME overlap with the existing residential stock. As evidence, I give unto thee:

Heather Miller sold herself on buying a new condo Downtown. A Cranberry native who lives in Mt. Washington, Miller already shops in the Strip District and works as a site coordinator in the old Union National Bank building on Fourth Avenue, which is being converted into The Carlyle. That place will have 61 luxury condos.

"I wanted to be on the cutting edge of this Downtown explosion," said Miller, one of 20 people who have purchased condos at The Carlyle before construction has begun. "This is going to be a neighborhood and a community down here."

Now, I agree that downtown housing will be different from existing residential offerings in many ways. And none of the detractors of whom I speak ever said than there would be absolutely no intra-city transfer of residents. But I do think that this kind of anecdote proves the obvious--that there will be at least SOME overlap.

My question is--and has always been--how much overlap will there be? It does not strike me as such a ridiculous question. And it does not seem all that outrageous to ask it, especially since the condos being built so far are aimed at the richest people in Pittsburgh and still, inexplicably, are receiving substantial government subsidies. All that despite Mr. Falbo's claim that "the market is obviously supporting it."

Comments

You are not nuts. I am with you. The new housing downtown will drive out others who will NOT live in neighborhoods in the city. Your case in point goes to a person moving downtown from Mt. Washington.

As another example where there needs to be research to support this trend, look to Somerset at Frick. There, new housing was sold and they used a lottery. The demand was big. The first buyer into that development was another resident of the city just moving to get into a safer neighborhood with more room and a better investment.

I hate, and always have spoken out against, subsidized housing for the rich downtown -- and in other neighborhoods.

I love, however, the elimination of the deed transfer tax. That is a benefit to all, especially the poor and middle class.